Archives: 02/2011

Trying Colombia’s Patience on Trade

Our friends in Colombia have been waiting more than four years for the U.S. government to consider a pending free-trade agreement between our two countries. According to an interview this week with Colombia’s ambassador to the United States, Gabriel Silva, Colombians are “losing patience” with their American ally.

The frustration in Colombia is understandable. The agreement was signed in November 2006, but it has been locked in the cupboard since then by labor unions and their congressional allies who claim the Colombian government has not done enough to curb violence in that country against union members.

My Cato colleague Juan Carlos Hidalgo and I examine the agreement and the claims against it in a new Cato Free Trade Bulletin, “Trade Agreement Would Promote U.S. Exports and Colombian Civil Society.” We found that on the commercial side the agreement would deliver the “level playing field” the politicians always tell us they want. Once implemented, it would open the door to an additional $1 billion in U.S. exports.

As for violence against union members, we report the latest evidence that the number of union members killed is down dramatically in recent years, and prosecutions are up even more sharply. Contrary to the story told by critics of the agreement, the murder rate among union members in Colombia is actually far lower than the rate among the general population.

You can read the full bulletin here.

Obama’s Budget Means the Burden of Government Spending Will be $2 Trillion Higher in Ten Years

Fiscal policy wonks (like me, I’m forced to admit) sometimes miss the forest because we focus too much on individual trees.

So while I think my posts on the spending and revenue sides of Obama’s new budget contained lots of useful information, I didn’t pay any attention to the elephant in the room (I’m really going overboard with metaphors, huh?).

The most important number in Obama’s budget is that he is proposing $5.7 trillion of spending in 2021, about $2 trillion more than is being spent this year, according to table S-1 of the budget.

Here’s everything you need to know about Obama’s budget, in one chart.

It’s important to make three additional observations. First, Obama’s budget is based on all sorts of optimistic assumptions and rosy scenarios, as explained by Brian Riedl of the Heritage Foundation. When CBO produces a re-estimate of the President’s budget, it almost certainly will show hundreds of billions of dollars of additional spending.

Second, the slope of the line if the graph is very revealing. The first two years look very impressive, with almost no change in spending, but the goal of fiscal policy, to borrow a phrase from the health care debate, should be “bending the cost curve” of government. Short-run gimmicks, to put it mildly, don’t have any long-run impact. That’s why the most important number in Obama’s budget is the $5.7 trillion burden of spending in 2021. That’s a mark of fiscal failure, and it exists because Obama’s budget increases spending at twice the rate of inflation between 2013 and 2021.

Third, many people have appropriately criticized the White House for moving the fiscal goalposts (oops, another metaphor) and focusing on a technical budget concept known as “primary deficit” or “primary balance” instead of traditional budget measures. This is an arcane issue involving the difference between total spending compared to overall spending minus interest payments. Yes, the White House is being slippery, even earning a false rating from PolitiFact, but this is a red herring (there I go again) issue. What really matters is the size of government, not regular deficits or primary deficits. Too many Republicans are fixating on the symptom of too much borrowing and paying insufficient attention to the underlying disease of too much spending. This video explains further.

Abortion Is Only the Tip of the Iceberg

Today POLITICO Arena asks:

Given the push by Rep. Mike Pence (R-Ind.) to deny all federal funding to Planned Parenthood, are we seeing the revival of abortion as a major fault line in American politics?

My response:

Opponents of the push to deny federal funding to Planned Parenthood and other abortion providers will try to inflame the debate by characterizing the push as an attack on the Supreme Court’s discovery of a right to abortion. But the issue goes much deeper and is perfectly generalizable: it’s a push to get government out of one more controversial area of life.

Most modern liberals fail to grasp – or ignore – a fundamental principle of political theory, namely, that the more we do collectively, the more liberty is restricted and passions are inflamed. That’s why classical liberals asked government to provide only “public goods” like national defense, law enforcement, and clean air. Abortions are private goods (for some). Under current law, women are free to seek them from willing providers. And others are free to assist those who cannot afford an abortion. But no one should be compelled to provide or pay for another’s abortion. It’s a matter, quite simply, of freedom.

House Debates Spending—-and REAL ID Is on the Chopping Block

It’s a good thing for Congress to have an open debate on the bill that would fund the government from March 4th through the September 30 end of the 2011 fiscal year. The alternative is for the bill to be written and the political log-rolling to be done entirely behind the scenes. Open debate of the bill and amendments requires at least some level of discussion about various projects and programs rather than spending decisions being based solely on raw political power. And it gives the public some chance to have a say.

The debate may include an amendment to strip funding from the REAL ID Act, our deplorable national ID law. As I wrote here before, money spent on REAL ID is waste. That money should be put to better uses, including deficit reduction. No future money should go to the national ID boondoggle, and ultimately REAL ID should be repealed once and for all.

Amendment #277 (find it on this page, scroll down…) would add the following language to the FY 2011 spending bill:

None of the funds made available by this Act may be used by the United States Citizenship and Immigration Services for the implementation of the REAL ID Act of 2005 (Public Law 109-13).

Congratulations are due to David Price (D-NC) for highlighting this issue. A national ID would not provide security gains that come anywhere close to the costs of creating a national ID and living under a national ID system. People who desire a national ID for immigration control conveniently forget or omit that natural-born citizens would be required to have and carry a national ID while illegal immigrants work various ways to defeat any of the utterly porous “internal enforcement” systems that restrictive immigration policies have made plausible. A national ID would be used not just to control access to working, but to housing, health care, financial services, and more. In short, it would make the country less free.

I’ll report here what happens with this amendment and the debate on it, which is a debate worth having.

Administration Playing Both Sides on Fannie Mae

On Friday the Obama Administration released its report on “reforming America’s Housing Finance Market.”  The report claimed that the Administration would work toward “winding down Fannie Mae and Freddie Mac on a responsible timeline.” 

While the report was silent on what a responsible timeline would be (surprise, no details); I assumed, perhaps naively, that a reasonable timeline would be 5 to 6 years.  So you can imagine my surprise while reading the Administration’s budget proposal (see Table S-12 of the summary tables), released Monday, that the Administration is projecting that the government will be receiving, between 2012 and 2021, $89 billion in dividend payments from Fannie Mae and Freddie Mac.  In 2021 alone the White House projects $8 billion in dividend payments.  But here’s the rub, for Fannie Mae and Freddie Mac to be paying dividends in 2021 requires that they still be around.

So would the Administration please be straight with us for just a minute: are you or are you not proposing that Fannie Mae and Freddie Mac disappear; and if so, when?

Another odd thing from the budget, again Table s-12 lists the net equity position of Fannie and Freddie as negative.  Well that’s obviously true, but it also raises the question of why they are still in conservatorship, as the law requires them to be taken into receivership once they’ve reached negative equity.  Then perhaps OMB and Treasury have different definitions of net equity.

Physician, Heal Thyself

Announcing a new Senate subcommittee devoted to privacy, Senators Leahy (D-VT) and Franken (D-MN) said nothing about privacy threats from government.

A “boom of new technologies over the last several years has … put an unprecedented amount of personal information into the hands of large companies that are unknown and unaccountable to the American public,” Franken said, according to an AFP report.

A boom of new technologies has put an unprecedented amount of personal information into the hands of the federal government—in some cases, illegally. It takes a lot of gall to point at commercial data collection from the atop the dunghill of federal privacy invasion. But there’s a lot of gall to go around in Washington, D.C.

Sen. Paul and the Writs of Assistance

Senator Rand Paul is moving beyond economic issues. His critique of the Patriot Act may be found here.

Sen. Paul lauds James Otis, Jr, the most important opponent of the writs of assistance imposed by the British prior to the American Revolution.  By invoking the name of this great patriot, Sen. Paul is trying to recall for Americans the original meaning of our Revolution and Constitution. He is practicing a politics of the original public meaning of America.

An astonishing performance.